Pricing, Pricing, Pricing...May 20, 2019
Do you struggle to know how to price your services?
Are you worried that your clients will leave you because the competition down the road are cheaper?
Do you avoid the pricing conversation with the prospect and offer to ‘send them a proposal’ instead?
If you do nothing else to transform your firm’s profits, then work on your pricing.
There are 9 drivers of profit (I talk about these in my book ‘Transform Your Profits through Price’ https://transformyourprofits.co.uk/). And out of all these drivers, pricing is the most powerful in the profit equation.
That’s why you should start with getting your pricing right.
When I started out, I used to see a client, have a meeting and then send them a proposal. I came up with the price by looking at what their current accountant charged them in the previous year - which I obtained from their accounts. I pitched my fee sometimes slightly lower or slightly higher depending on the level of service I had pitched. Sound familiar?
Please don’t make this BIG mistake that I used to make – NEVER send out a proposal in the post or by email.
When you do that, you are just a number at the bottom of a page – which gets compared to someone else’s number and, more often than not, the cheaper one is selected – or the cheaper quote is used to bat you down on yours. Ring a bell?
You must have the pricing conversation in person with the prospect. That way, you are there to answer any objections they may have and, more importantly, communicate the VALUE that you will bring to them.
The prospect is looking to make a ‘profit on the deal’. You must demonstrate that the value you bring outweighs the price they pay. The fact that they are talking to you means something is not right with their existing accountant – which means that they are likely to want to pay more for a better service!
Communicate the VALUE you will bring
There are many ways to do this. For example, when trying to communicate the value of your tax planning services, quantify the amount of tax that you can save.
When communicating the value of your compliance services, quantify the amount of time you will save the client.
When communicating the value of your strategic planning services, quantify the value of the things the client will obtain by working with you.
You can obtain the above information in a fact-finding meeting with a prospect. For a high value prospect, I always adopt a two-meeting approach. The first meeting is the fact find. The second is where I run through a proposal drafted for the client, and go through the price or prices.
Research has shown that you get a better result when you allow the customer to have control over the buying process rather than giving them a single price and a “take it or leave it”.
Furthermore, when you involve the customer in the buying process, you get better results. That’s why it’s an advantage to use software to price services for a prospect. The customer is choosing what they want to buy rather than taking what you want to sell.
Use software to help you
Software like Go Proposal and Cloud Pricing allow you to put software between you and the prospect to agree a mutual price for your services. You can customise software to ask questions from the prospect about their particular circumstances.
The greater the client’s needs (scope) and the more their wants (requirements), the higher the fee you should charge. By having an iterative process that covers each client’s needs and requirements, and giving them a unique price for doing so, you will get better results and avoid scope creep.
As accountants we tend to be introverts. We don’t like having the price conversation. We do so much for free because we worry about raising the subject of fees with our clients.
Although a mindset change needs to be had to move away from giving away everything for free and valuing your time and expertise more, the software can be a very helpful aid and can start to yield results, fast.
I’m not even going to talk about time-based billing because that is yesterday’s news! Time-based billing is wrong on so many fronts. Clients hate it. And when technology is making the compliance work a lot faster to generate, you would be shooting yourself in the foot by charging by the hour.
Most accountants have moved across to some form of fixed fees and value pricing. Value pricing is an art and takes time to perfect. But keep working on it and you’ll get much better results as you test, measure and repeat.
There is so much more I could write on pricing, but if there are two actions you should take on pricing if you’re not already doing so, they are:
- Stop sending out proposals by email / post
- Sign up to software to assist you in pricing your services, in person, with prospects.
When you learn to price better and get higher prices, you will make more profit and have more cash in the bank. That will allow you to work ON your practice as the Entrepreneur rather than IN it like the Technician. It will give you the room you need to start positioning yourself as the credible expert – more on that later.
Action point: Mastering pricing WILL transform your profits. Period.